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>Otherwise that tax will end up increasing a resident's rent/mortgage It would do nothing to rents or mortgages intrinsically but it would cause property price

by pydry 5y ago

>Otherwise that tax will end up increasing a resident's rent/mortgage It would do nothing to rents or mortgages intrinsically but it would cause property prices to fall and it could add to the tax burden of regular property owners depending on how it were implemented (i.e. if the tax free threshold were set too low). >that still wouldn't be much of a disincentive to the wealthy It would be a massive disincentive to the wealthy, since they own the most property and are used to it being an asset not a liability. They would dispose of properties that were nonperforming because taxes > capital appreciation + rent and this would spiral as falling prices leads to more hoarded properties being given up. They would also scramble to rent out previously unrented properties where capital appreciation wasnt covering taxes. More rentals on the market means even lower rents which makes their properties worth even less to them.

giantg2 5y ago
"It would do nothing to rents or mortgages intrinsically" Most people have their property taxes escrowed with their mortgage payments. Taxes can easily account for 25% of one's monthly payments. As for rent, the property owners just pass the cost on to the tenants by increasing rent. So property taxes are related to rent and mortgage payments. Even if not included directly in the mortgage payment, it affects how much of a mortgage one can afford. "It would be a massive disincentive to the wealthy, since they own the most property and are used to it being an asset not a liability." I'm not sure about this. Just because they own more property doesn't mean they would be the most affected. The tax would likely be a larger percentage of a "normal" person's income for their own home and thus more impactful to them. Plus, if the wealthy are renting out the majority of the properties, then they can make up for tax increases by raising rents (because property tax increase priced more people out of homes (because the price drop was a drop in demand), increasing demand for rentals). I do agree that it should incentivize full utilization of rental properties. But I don't think there are enough vacant rentals to affect supply/pricing, but I don't have the numbers. I would think that most owners are already utilizing residential rentals pretty much at full capacity in the markets that are the tightest.
- pydry 5y ago
  >As for rent, the property owners just pass the cost on to the tenants by increasing rent Rents would either remain unchanged or go down. I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged. The only change I could forsee to affect either is previously empty properties being put up for rent in order to cover tax payments to turn property liabilities back into property assets. This would increase supply. >Plus, if the wealthy are renting out the majority of the properties, then they can make up for tax increases by raising rents They'd really love for that to be how it works and sometimes they pretend it is.
  - giantg2 5y ago
    "I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged." What you're missing is that the market floor get universally pushed up. There's no competition from cheaper places because they all increased their rent to cover the new coat so they can still make their same margin. The demand is still there because people still need a place to live. "The only change I could forsee to affect either is previously empty properties being put up for rent" Any numbers on that, or are you just going to keep claiming it's a big enough vacant supply to significantly affect prices? "They'd really love for that to be how it works and sometimes they pretend it is." This is still tied to the previous comment. If the number of vacancies are not sufficient, then supply is adequately constrained to just increase the prices to cover costs. Because, again, this increase moves the market floor.
    - lurgburg 5y ago
      > they all increased their rent Why would they not have done this before, if they could? Landlords aren't trying to maintain some fixed margin, they want as much as possible, always.
      - giantg2 5y ago
        Because of competition. They can't all conspire together to price fix (or if they do they could be arrested).

by pydry 5y ago

giantg2 5y ago

"It would do nothing to rents or mortgages intrinsically" Most people have their property taxes escrowed with their mortgage payments. Taxes can easily account for 25% of one's monthly payments. As for rent, the property owners just pass the cost on to the tenants by increasing rent. So property taxes are related to rent and mortgage payments. Even if not included directly in the mortgage payment, it affects how much of a mortgage one can afford. "It would be a massive disincentive to the wealthy, since they own the most property and are used to it being an asset not a liability." I'm not sure about this. Just because they own more property doesn't mean they would be the most affected. The tax would likely be a larger percentage of a "normal" person's income for their own home and thus more impactful to them. Plus, if the wealthy are renting out the majority of the properties, then they can make up for tax increases by raising rents (because property tax increase priced more people out of homes (because the price drop was a drop in demand), increasing demand for rentals). I do agree that it should incentivize full utilization of rental properties. But I don't think there are enough vacant rentals to affect supply/pricing, but I don't have the numbers. I would think that most owners are already utilizing residential rentals pretty much at full capacity in the markets that are the tightest.

pydry 5y ago
>As for rent, the property owners just pass the cost on to the tenants by increasing rent Rents would either remain unchanged or go down. I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged. The only change I could forsee to affect either is previously empty properties being put up for rent in order to cover tax payments to turn property liabilities back into property assets. This would increase supply. >Plus, if the wealthy are renting out the majority of the properties, then they can make up for tax increases by raising rents They'd really love for that to be how it works and sometimes they pretend it is.
- giantg2 5y ago
  "I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged." What you're missing is that the market floor get universally pushed up. There's no competition from cheaper places because they all increased their rent to cover the new coat so they can still make their same margin. The demand is still there because people still need a place to live. "The only change I could forsee to affect either is previously empty properties being put up for rent" Any numbers on that, or are you just going to keep claiming it's a big enough vacant supply to significantly affect prices? "They'd really love for that to be how it works and sometimes they pretend it is." This is still tied to the previous comment. If the number of vacancies are not sufficient, then supply is adequately constrained to just increase the prices to cover costs. Because, again, this increase moves the market floor.
  - lurgburg 5y ago
    > they all increased their rent Why would they not have done this before, if they could? Landlords aren't trying to maintain some fixed margin, they want as much as possible, always.
    - giantg2 5y ago
      Because of competition. They can't all conspire together to price fix (or if they do they could be arrested).